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Zoho co-founder Sridhar Vembu has issued a stark warning about the future of India’s software and IT services sector, suggesting that the industry is facing a fundamental reckoning—one that goes far beyond a temporary slowdown or the rise of artificial intelligence. Instead, he believes the sector is undergoing a structural transformation that will shape the coming decades. In a post on X, Vembu argued that the global software industry has long suffered from inefficiencies in both its products and services.
“My operating thesis: what we are seeing is not just a cyclical downturn and it is not just AI-related. Even without the uncertainty induced by tariffs, there was trouble ahead. My operating thesis: what we are seeing is not just a cyclical downturn and it is not just AI related.
Even without the uncertainty induced by tariffs, there was trouble ahead. The broader software industry has been quite inefficient, both in products and services. These.
.. https://t.
co/hhOA9XUFfX — Sridhar Vembu (@svembu) April 18, 2025 “The broader software industry has been quite inefficient, both in products and services. These inefficiencies have accumulated over decades of a prolonged asset bubble,” wrote Vembu, who stepped down as Zoho’s CEO in January to concentrate on research and development. He pointed out that India, as one of the world’s leading exporters of software and IT services, has not only adapted to these inefficiencies but has come to rely on them, with millions of jobs now dependent on the sector’s growth.
“Sadly, we adapted to a lot of those inefficiencies in India. Our jobs came to depend on them. The IT industry sucked in talent that may have gone into manufacturing or infrastructure (for example),” he said.
Vembu’s remarks come at a time of growing anxiety about the software sector’s future, as automation and AI continue to disrupt established business models. Industry analysts warn that AI-driven development tools could drastically increase productivity, reducing the need for large teams and potentially diminishing the economic impact of software firms—particularly in countries like India, whose economies are heavily reliant on tech exports. While much of the current discourse focuses on AI and global trade uncertainty—such as tariffs impacting tech supply chains—Vembu stressed that these are merely contributing factors.
He believes the underlying structural issues would have caught up with the industry regardless. “We are only in the early stages of a long reckoning. The last 30 years are not a good guidepost to the next 30 years.
We are truly at an inflection point,” Vembu warned, urging leaders across the industry to question long-held assumptions and rethink their approach to future growth. Also read: BluSmart halts cab services: Here’s a step-by-step guide to claim wallet refund via app.
